Ai Holdings Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥20.27B
• Operating Income: ¥2.04B
• Net Income: ¥9.80B
• EPS: ¥77.13

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Solid top-line growth with mixed profitability and an unusually large below-tax adjustment that depressed attributable net income. Revenue surged 80.6% YoY to 202.7, driving operating income up 14.7% YoY to 20.39 and ordinary income up 90.2% YoY to 22.79. Gross profit reached 57.09 with a gross margin of 28.2%, while operating margin landed at 10.1%. Ordinary margin improved to 11.3%, but the net margin printed a high 20.3% on an attributable basis due to a sizable gap between profit before tax and reported net income. Operating margin compressed materially YoY (by an estimated ~580 bps) because revenue grew far faster than operating income, indicating negative operating leverage in the quarter. Conversely, ordinary margin likely expanded slightly (by an estimated ~60 bps), suggesting supportive non-operating tailwinds relative to sales. The step-up from operating to profit before tax (103.30) implies significant extraordinary items; however, attributable net income (41.09, -58.1% YoY) was far below pre-tax profit after tax, suggesting large deductions below the tax line (e.g., losses attributable to non-controlling interests or extraordinary losses after tax). The effective tax rate was low at 5.1%, reinforcing the view that below-tax items, not taxation, explain the gap between pre-tax and attributable profit. Liquidity remains exceptionally strong with a current ratio of 511% and cash and deposits of 484.98 against current liabilities of 165.05. Leverage is conservative (D/E 0.25x) with interest expense at only 0.03 and interest coverage of 679.7x. However, capital efficiency is weak with ROIC at 3.1% (below the 5% warning threshold), driven by low asset turnover (0.146x) and modest leverage (1.25x). Earnings quality cannot be verified due to unreported cash flow data; OCF/NI is not calculable. Dividend sustainability looks stretched this quarter with a calculated payout ratio of 137.7%, though the large retained earnings balance (834.55) and cash cushion provide near-term flexibility. Forward-looking, the strong balance sheet allows continued investment, but improving ROIC and stabilizing margin structure are key to re-rating. We expect volatility in quarterly earnings given apparent exposure to one-off items and timing effects, making the trajectory of operating margin and below-tax adjustments critical watchpoints.

Profitability Analysis

DuPont decomposition (ROE = Net Profit Margin × Asset Turnover × Financial Leverage): ROE 3.7% = 20.3% × 0.146 × 1.25x. The dominant constraint on ROE is very low asset turnover (0.146), followed by modest leverage (1.25x); net margin is optically high but distorted by below-tax items. Change driver: Operating margin compressed significantly, as operating income (+14.7% YoY) lagged far behind revenue growth (+80.6% YoY). Business reason: Rapid revenue expansion likely came with mix shifts, project ramp costs, or timing of high-cost deliveries, while SG&A at 39.31 (19.4% of sales) limited operating leverage. Sustainability: The negative operating leverage appears cyclical/timing-related rather than structural if mix normalizes; however, persistently low asset turnover suggests structurally low capital efficiency unless asset base is optimized or recurring revenue mix rises. Flagged trends: - Estimated operating margin compression of ~579 bps YoY (from ~15.9% to ~10.1%). - SG&A ratio at 19.4% is elevated for this level of sales and may need tighter cost control to restore margin. - Below-tax adjustments created a large gap between PBT and NI, making the net margin less reliable as an indicator of core profitability.

Growth Assessment

Revenue growth was exceptionally strong at +80.6% YoY to 202.7, indicating robust demand and/or significant project deliveries or consolidation effects. Operating income grew +14.7% YoY to 20.39, underperforming revenue and implying negative operating leverage in the quarter. Ordinary income rose +90.2% YoY to 22.79, suggesting supportive non-operating contributions relative to sales. Net income fell -58.1% YoY to 41.09 due to large below-tax deductions (e.g., minority interests or extraordinary losses after tax) despite the high reported profit before tax. Profit quality is mixed: operating performance is stable but margins compressed; ordinary income improved; attributable net profit was volatile. Revenue sustainability hinges on the repeatability of large orders or project timing; without segment detail, we treat the +80.6% as potentially non-recurring pace. Outlook: Focus on normalizing operating margin toward mid-teens, reducing dependence on non-operating/extraordinary items, and improving asset turnover to lift ROIC above 5%. Near term, the strong balance sheet supports continued business development; mid term, capital efficiency must improve for sustained EPS growth.

Financial Health

Liquidity is very strong: current ratio 511.3% and quick ratio 452.0%, with cash and deposits at 484.98 far exceeding current liabilities of 165.05. No warning on current ratio (<1.0) or leverage (D/E 0.25x well below 1.5x). Maturity mismatch risk appears low given the sizable cash pile versus accounts payable of 58.08; short-term loans and interest-bearing debt are unreported but total liabilities are modest at 273.16. Solvency is robust with total equity of 1,113.89 covering 80% of assets (implied equity ratio ~80% using available figures). Interest burden is negligible (interest expense 0.03) with interest coverage at 679.7x. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported; therefore, OCF/Net Income and FCF cannot be calculated. As such, we cannot confirm earnings conversion or working capital behavior this quarter. The large cash balance (484.98) provides a cushion, but without OCF, sustainability of dividends and capex cannot be validated. Working capital signs: inventories at 97.79 and receivables at 160.56 increased absolute exposure to working capital, but without prior period or cash flow data we cannot infer manipulation or build/flush dynamics.

Dividend Sustainability

The calculated payout ratio for the quarter is 137.7%, indicating dividends exceed attributable earnings in this period. OCF and FCF are unreported, so coverage from cash generation cannot be assessed. Balance sheet capacity is strong with retained earnings of 834.55 and significant cash reserves, supporting near-term distributions. However, for sustainability, payout should align with normalized earnings and FCF; improvement in operating margin and stabilization of below-tax items are prerequisites. Policy outlook cannot be inferred from the data provided.

Risk Assessment

Business Risks:

• Margin pressure from unfavorable mix and ramp costs leading to negative operating leverage
• Volatility in below-tax items (e.g., minority interests, extraordinary gains/losses) driving swings in attributable net income
• Execution and timing risk on large projects/orders affecting quarterly revenue and profit recognition
• Low ROIC (3.1%) indicating weak capital efficiency and potential value dilution if not improved

Financial Risks:

• Potential earnings-dividend mismatch (payout ratio 137.7% this quarter) absent confirmation of FCF coverage
• Working capital intensity with sizable receivables (160.56) and inventories (97.79) that could tie up cash during slowdowns
• Data gaps on interest-bearing debt and cash flows that may hide refinancing or cash conversion issues

Key Concerns:

• Significant gap between profit before tax (103.30) and attributable net income (41.09) after a low tax charge (5.1%), implying large below-tax deductions
• Operating margin compression (~579 bps YoY estimate) despite strong revenue growth
• Capital efficiency below benchmark (ROIC 3.1% < 5% warning)

Investment Implications

Key Takeaways:

• Top-line growth was exceptional (+80.6% YoY) but did not translate proportionally to operating profit (+14.7% YoY).
• Operating margin compressed to 10.1%, while ordinary margin modestly improved; net income was distorted by below-tax items.
• Balance sheet strength (cash-heavy, low leverage) provides flexibility to invest and support dividends.
• ROIC at 3.1% underscores the need to lift asset turnover and stabilize margins to enhance returns.
• Earnings visibility is limited by reliance on extraordinary/below-tax items and unreported cash flow data.

Metrics to Watch:

• Operating margin trajectory and SG&A ratio (cost discipline)
• OCF/Net Income and FCF once disclosed (earnings quality)
• Asset turnover and ROIC improvement toward >5% near term
• Composition of below-tax items and minority interest impact
• Working capital turns (DSO, DIO) and project delivery cadence

Relative Positioning: Financially conservative with superior liquidity and low leverage versus typical mid-cap peers, but trailing on capital efficiency (low ROIC, low asset turnover) and displaying higher earnings volatility due to below-tax adjustments; share-price sensitivity likely tied to margin normalization and evidence of improved cash conversion.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis